I Call BS!

There's a populist-driven whirlwind racing across the land, based on sketchy data, fear of the unknown, and a firm belief that the gummint is (or should be) empowered to make sure that nothing bad ever happens to us or our fellow Americans.

And no, I'm not talking about (so-called) Global Warming.

Recently, the Governor of Texas decreed that young women must be immunized against the dreaded HPV virus. Here in the Buckeye State, a similar effort is afoot. Other states are even now taking up the banner of this "righteous cause," whose proponents consider those with reservations dangerous, misinformed, misogynistic, you name it.

After all, who could be against the health of our children (see, men are susceptible to HPV, as well)?

Well, I am, for one.

"But Prof," you may cry, "you have two (lovely) daughters of your own, surely you want to protect them?"

And indeed I do.

I do.

It's my responsibility, and part of that responsibility is to make an informed decision. Here on IB we talk a lot about personal responsibility when it comes to health care, and I would be a hypocrite if I didn't walk that walk. So let's take a look at the whole brouhaha through the lens of risk:

HPV is the Human PapillomaVirus (no relation to Papillon, of course), which is a virus that causes abnormal tissue growth (warts) and is often associated with some types of cancer. The Centers for Disease Control suggest that up to one fourth of American women (ages 14 to 59) are infected with the disease. And how do they know this? Oh, very simple: by testing vaginal swab specimens from less than 2,000 women. Yup, that's right: less than 2,000 out of an estimated 100 million women in this age cohort.

Gee, what a great statistical model!

And then there's the question of just how dangerous this "menace" really is: less than 3,700 American women are expected to die from HPV related cancer this year. While that's a terrible tragedy, let's keep a bit of perspective, shall we: about 4,000 people die in fires every year; almost 5,000 drown; 5,500 are hit by cars and die; heck, food poisoning kills some 6,500 folks every year (if we assume, reasonably, that half of those are women, then why aren't we outlawing food?).

And by the way, why just daughters? Dr. Eileen Dunne, the CDC's lead, um, person on this issue, says that "HPV prevalence is thought to be high in men as well, but none were studied." Gee, thanks!

There doesn't seem to be a percentage-based definition of an "epidemic," but according to at least one, it's characterized as "(t)he occurrence of more cases of a disease than would be expected in a community or region during a given time period." If some 25% of women (and who knows how many men) have now been infected by the HPV, then why hasn't the CDC called it an epidemic? Gosh, how many people have to become infected?

Now, I won't pretend to advocate that people avoid this vaccine like, well, the plague. But I darn sure can't agree that it's the role of our government to force our daughters (and again, why not our sons? Are they disposable?) to be vaccinated against a sexually transmitted disease. And no, I don't have my head buried in the sand: remember we talked about risk? Well, look again at those stat's about other causes of death. We could easily outlaw swimming pools and cars, require homes to be built of concrete and furnished 100% with non-flammable items, and eat only specially processed (nuked?) foods.

Why aren't the nannies pushing for that?

Cavalcade of Risk #20 is up!

Renthusiast hosts this end of February issue, with some new faces, interesting categories, and helpful commentary.

Be sure to check it out!

The Renthusiast can tell you, hosting a Cav is fun, easy, and a great traffic booster. For your chance, just drop us a line.

Outsourcing HR

International HR (Human Resource) firm Hewitt Associates recently surveyed some 100 larage companies here in the US. These companies represented about 2 million employees between them, so we're not talking a lot of Mom & Pop Shops.

What they found is that HR executives are increasingly concerned about attracting, retaining, and growing new talent. Toward that end, it's becoming readily apparent that we're in for a period of sustained outsourcing of HR functions:

Carnival Monday...

This week's Carnival of Personal Finance has a celebrity theme (in honor of the Oscars, one presumes). It's a literally star-studded gala of interesting posts, hosted by Henry and Matt at Binary Dollar.

I'm not sure what to make of the fact that our own Mike Feehan is represented by the Guvernator (has the host been reading some of Mike's previous posts?).

And it appears that Joe Kristan, at Roth and Co, must be smiling enigmatically. I'm not sure why, but his post on the importance of accurate record-keeping is a classic.

An Override By Any Other Name...

[From time to time, we’re privileged here at IB to publish posts by esteemed “guest bloggers.” This post, by a gentleman who prefers to remain anonymous, details a disturbing trend in the insurance industry. While we usually prefer not to rely on “anonymous sources,” I can personally vouch for the integrity and inside knowledge that this gentleman brings to the table. Where relevant, I’ve also included links to previous IB items in which he’s had a hand. HGS]

Everyone in the health insurance business has had the subject of overrides come up during their career. Either they have taken part in them, wish they could have, or declined to be part of this monetary form of bribery. Agents and brokers who did “partake” enjoyed extensive additional compensation based on how much business they placed with a certain carrier. They built huge agencies, enjoyed huge lifestyles and grew huge egos. And they steered business to companies that paid the most, keeping out of competition those companies that paid them the least. Some of that compensation is believed to be 2, 3 or even 4 times the regular commission being paid. No one knew what was being paid and it was never disclosed to the customers. This was the equivalent of the Wild Wild West!

In the last two years the Ohio Department of Insurance has investigated this practice in Columbus and other areas (yet to be announced), solicited agreements from Anthem and United HealthCare on the subject, and has recommended the suspensions of agents who have misled their clients regarding compensation. Now Anthem has publicly said they pay “no overrides” of any kind to any agent, just “regular commissions” and any bonus due. While this remains true for the most part, how would a certain local agency pay a starting account manager $70,000 a year, expand and open 2 new offices in Columbus and Cincinnati, continue to hire non-sales personnel and remodel their palatial headquarters every few months with lots of bling? And pay their producers 50% of the standard commissions to boot?

By way of comparison, most large agencies pay their “producers” (that is, the agents who actually write the business) 30 to 40 percent of the commission, and little (if any) of any overrides or bonuses. If a “mega-agency” can afford to pay its producers 20 to 25% more commissions on a given piece of business, it seems likely that it’s making more than “the normal” compensation.

Welcome to the world of “Expense Reimbursement.” This flies under the radar of the dreaded 5500 (industry standard disclosure form). What keeps XYZ Mutual from paying a portion of an agency’s monthly payroll and other expenses? A well-known insurance agents advocacy organization, The “Big I,” recently published an article on this issue as it pertained to our Property & Casualty brethren. In an email exchange with the article’s author, I asked if he’d heard of such a thing on the group side of the business. He replied:

“With regard to the national HMOs my understanding is that volume "bonus" schedules are fairly commonplace for larger producers. I also believe this applies to the traditional group dental/disability/life carriers. However, some of the national carriers are pressing for disclosure of incentive compensation. There has been a feeling that since the Schedule A attachment to the Form 5500 discloses commissions, disclosure is less of an issue. But, some carriers are reviewing incentives such as Expense Reimbursement Allowances because these are undisclosed payments and won't show up on the 5500.”

Pretty amazing if this is going on! Is this another Marsh situation? Is this a level playing field for all? Will competition be eliminated even further? And will the smaller agent be gobbled up by the big agent?

Inquiring minds want to know.

Insurance Dispatch...

In this week's Dispatch, we revisit a previous IB post on how new legislation can help turn health care expenses into tax savings.

Check it out at Trusted.MD

News From the "D'uh! Dept"

I think the headline pretty much says it all:

Meetings make us dumber, study shows

No kidding?

I see this all the time (at carrier “get togethers,” especially). The article sums it up quite nicely:

“The researchers speculate that when a group of people receives information, the inclination is to discuss it. The more times one option is said aloud, the harder it is for individuals to recall other options…”

It’s often called the “echo chamber” effect, and it’s easy to get sucked into it.

I have a few more thoughts on this, but I have to get to, well, you know.

Cavalcade #20: Submissions Due

SPECIAL NOTE: We've been selected by Blog Carnival as their Featured Carnival for February 23rd. We'll be "splashed" all across their homepage all day!

Submissions for next week's CoR, hosted by Renthusiast, are due this coming Monday (the 26th).

You can submit your (or someone else's!) risk-related post via:

Blog Carnival

or

Email

Please include:

► Your blog's url
► Your post's url
► The trackback url (if applicable)
► A (brief) summary

PS We're scheduling hosts for early Spring '07, so don't wait too long to sign up!

HSA: More Good News

I have a healthy skepticism when it comes to “breaking news” from insurance companies, even when that news tends to confirm that which I already know to be true. So, I was initially a bit dubious when I saw the title of this email which came across my monitor: “New HSA Data Reveals Positive Consumer Engagement.”

Among other entities, UHC (United HealthCare) owns a third party administrator (TPA) called Definity, and a financial institution (BANK) by the name of Exante [OT: how come there was so much gnashing of teeth when Barnett was handed down, allowing banks into the insurance biz, but when carriers seek inroads into banking, not so much?]. UHC uses the former to administer its Consumer Driven products (HRA, HSA, etc) and the latter to handle the actual funds.

In the event, UHC commissioned a study for the 2005 plan year, the purpose of which was to determine what effects, if any, Consumer Driven plans would have on insureds and their behaviors. The results, based on 25,000 covered lives, are striking:

As I had long suspected (based on the experiences of my own clients over the past 15 or so years), consumers are using their accounts as savings tools, including investment options as a means toward even greater accumulation. Some 86% of those in CDH plans (HSA-compliant) had opened an account, with an average balance of over $800 at year’s end.

Unlike their MSA forebears, HSA plans allow both employers and employees to make contributions (with MSA, it was either one or the other in any given year). And folks are taking advantage of that flexibility: over 2/3 of employers contributed at least some cash to their employees’ plans. What’s more, the average employer contribution was almost $900. And a similar percentage of employees contributed to their own accounts, to the tune of $1,200 (on average). Not too shabby.

Perhaps more interesting was the unexpected: nationally, some 60% of those who opt for High Deductible plans actually set up an account. But well over 80% of the folks in the Definity group set them up. UHC hypothesizes that this is due to employers using “an integrated health plan and bank account model.” I’m not sure that’s true: the key phrases here are “employer” and “employee.” That implies that most (if not all) of the 25,000 folks in the survey were covered under group plans. Most employers would want to keep things simple, and thus look towards setting up as seamless an arrangement as possible. Hence, the high percentage of health plans integrated with savings accounts.

Not surprisingly, the greatest single influence on the account opening rate seemed to be employer funding; that is, 91% percent of eligible employees opened an account if their employer made a contribution. Anyone that’s installed a qualified retirement plan (401k, SIMPLE, etc) knows that employee participation is heavily dependent on employer participation.

The other good news in this report is a decent fisking of one of the more pernicious criticisms of Consumer Driven Care: that such plans favor higher income individuals.

Not. True.

Some 80% of eligible low-income employees (those earning less than $25,000 annually) opened an HSA. And over 50% of these made their own contributions to the account, as well.

About the only thing that surprised me was that the size of the group mattered. That is, almost 90% of employees in large groups (5,000+) open an account; that drops to about 80% in small groups (1-99).

Go figure.

Wonky Thursday

Julie Ferguson, of Workers Comp Insider fame, hosts a terrific Health Wonk Review. In fact, it's the First Anniversary of HWR, and Julie presents a fitting tribute, with 14 excellent posts, and excellent context support.

Remember Y2K? Well, we're leading up to DST2k7 (not to be confused with MST3K). Confused? Don't be: read Shahid's post on the potential impact of the new Daylight Savings Time rules.

On Letters...

Regular IB readers may notice that the suffix following my name has changed. I recently earned my CBC designation, after a relatively short but very intensive course of study.

The initials stand for Chartered Benefits Consultant, and is awarded by the National Association of Alternative Benefits Consultants. Very briefly, the designation reflects a more indepth knowledge of so-called "alternative benefits" (such as FSA, HRA, etc) with special emphasis on the burgeoning field of Consumer Directed Health Care.

Since I've been intimately involved in that last for some 15 years, it seemed logical to make it a bit more "official;" hence, the designation.

I'd like to thank the academy...er, uh, my co-blogger Bob Vineyard for manning the fort late last week, as I was in class for two full days finishing up (BTW, his post on Stupid Doctor Tricks garnered the most ever hits for IB -- Congratulations, Bob!). I took the test on Saturday; some multiple choice, the bulk essays on specific case studies.

Anyone interested in my final grade is free to ask.

HOPE and Alphabet Soup

Bet you never heard of the Health Opportunity Patient Empowerment Act of 2006 (HOPE). No? Don’t feel too bad, most folks haven’t. Briefly, the Act, aka H.R. 6134, set out to clarify some confusions in how Health Savings Accounts (HSA’s) are managed.

Let’s pause a moment to review some favorite acronyms:

FSA: Flexible Spending Accounts. These ubiquitous jobbers were all the rage for a while, because they let eligible employees sock away tax-free dollars for unreimbursed health care expenses (and premiums, and day care). The downside: the notorious “use it or lose it” provision, which requires you to spend any moneys in the account.

HRA: Health Reimbursement Arrangements. These relatively new creatures enable employers to reimburse you for medical expenses, but you usually have to spend at least some of your own money first. The upside is, it’s your employer’s money going into the account; the downside is that you can’t cash it out if you leave (although some HRA's let you spend them down post-employment).

HSA: Health Savings Accounts. These are descendents of MSA’s (Medical Savings Accounts). Again, you put your own money in, pre-tax, but there’s no “use it or lose it” problem; the money just keeps rollin’ over. And, your employer can make deposits to the account, too. The downside to these is, well, I’ll have to think about that. Really, the major drawback (if it is one) is that you have to couple it with a special High Deductible Health Plan, which neither the HRA or FSA require (although it’s generally a good idea to use one if you’re going for the HRA).

IRA: Individual Retirement Account. What the heck’s an IRA doing in this discussion? Well, in case you didn’t know it, you can use your IRA to “seed” a new HSA, if you’re so inclined. Cool, hunh?

So, what’s all that got to do with HOPE? Well, in addition to using your IRA to help kick-start your HSA, you can use funds from your FSA, as well. That is, if there’s anything left in it. Since a lot of folks do end up with balances at the end of the year, there’s usually a mad rush for various medical expenses in December and January (the law says that FSA’s may be used up to 75 days after the end of the year; your plan may or may not have that provision). So your local One Hour Lens Mart may see a big spike in prescription sunglasses, for example. But what if you really don’t need to use those funds, but don’t want to lose them, either?

Well, HOPE to the rescue. Turns out, the law permits some FSA account holders a one time transfer of unused FSA assets into their HSA (offer good until Jan. 1, 2012), and those with HRA’s get the same privilege. That’s a good deal, because it means that folks can really pump up their HSA’s, cushioning the potential blow of a large claim. For those with an FSA, the deal’s good because it means that they don’t have to use their funds or risk losing them; for those with an HRA, it’s a way to make those funds portable.

Of course, if you do move the funds from an FSA or HRA, you don’t get to deduct the transfer from your taxes. But that seems a small price to pay for greater flexibility, and ownership. And in case you’re confused by all of this, the new guidelines include 13 examples showing how IRS officials want employers and employees to apply the new procedures.

Now you know.

ADDENDUM: A small, overlooked provision in President Bush's health care proposal would render much of this post moot. One part of his plan deletes the tax deductibility of medical expense FSA contributions. Ooops.

Manny’s Mandate

The New York Post reported 18 February:

“Poor New Yorkers will be entitled to free or low-cost medical treatment, under new rules meant to prevent hospitals from denying care to the uninsured.”

The new rules are actually final regulations implementing “Manny’s Law” - a mandate passed in New York about a year ago. That mandate strengthened earlier mandates requiring that hospitals give financial aid to indigent, uninsured patients. Among other things, the final regulations add a requirement to tell uninsured indigent patients that they are entitled to charity care. Sounds reasonable to me. After all why would a hospital want to keep that a secret, especially for a life-threatening condition? Read on.

“Manny” is Manual Lanza, a young New Yorker who was turned away from St. Lukes-Roosevelt Hospital in late 2005 because he had no insurance. Doctors and administrators at the hospital insisted he obtain Medicaid before they would agree to treat him. They did not tell him about other financial assistance available thru the hospital under existing New York law or, in fact, offer to help him enroll in Medicaid for which (I’m assuming) he was eligible. Manny subsequently died.

For many years, New York has mandated that its hospitals provide care to the indigent. Prior to 1997, hospitals tacked the cost of uncompensated care onto their bills for insured patients. Starting in 1997, New York began to tax insurance plans based on NY hospital benefits paid. Proceeds of this tax are placed into a pool managed by NYDOH and distributed among hospitals in New York. Of course, it’s the insured people who bear the ultimate cost of uncompensated care, whether financed by additional hospital charges or by taxes.

The state considers the provision of hospital services to be an entitlement for the indigent, and I agree the entitlement is necessary under present conditions. Because the entitlement is not called “insurance,” indigent persons receive hospital care and are still counted as “uninsured”. This meets the social need while pleasing the New York majority party, too, by not reducing the count of uninsured.

So what does this mean?

1. The uninsured “problem” is less serious than advertised. Despite the headlines and hustlers shrieking otherwise, “no insurance” does not really mean “no health care”.

2. Fix Medicaid, fix that problem. The number of uninsured Americans rises from the failure of Medicaid to fulfill its mission to insure the poor and working poor - because the clear majority of the uninsured are the poor and working poor.

Stealing private health information is not just about identity theft

“The case involved the theft and transfer of medicare patient information from the Cleveland Clinic in Weston, Florida. Defendant Ferrer Jr. purchased the patient information from co-defendant Isis Machado, a former Cleveland Clinic employee, who pled guilty on January 12, 2007 and testified against Ferrer at trial. The theft resulted in the submission of more than $7 million in fraudulent medicare claims, with approximately $2.5 million paid to providers and suppliers. According to the Justice Department, this is the first Health Insurance Portability and Accountability Act (“HIPAA”) violation case that has gone to trial in the United States.”

Read the whole Justice Department report here.

This theft of data led to fraudulent Medicare costs – paid for by our tax dollars. There is no reason to believe that private health plans are immune to similar thieves who want to cash in on fraudulent insurance claims, thereby driving up the cost of your insurance and mine. How much of this happens? The scary but true answer is: many have estimates, but no one really knows.

Patients, their family members, doctors, insurance companies and even lowly benefit managers have expressed frustration at the privacy rules arising from HIPAA. It’s true, these rules sometimes seem calculated to stop all the wheels of commerce at one swell foop. However it's important to understand more of the total story.

This case reveals a bit more of the total story - what the government is trying to prevent. Note that this is the first HIPAA violation that has gone to trial. If this is the kind of culprit that the feds are going after using HIPAA, I say more power to them.

Carnival Monday...

Sanjay Kumar, host of Simplify This, hosts a terrific Carnival of the Capitalists. In keeping with carnival founder's Jay's push toward greater relevancy, Sanjay culled about half the submissions, leaving, hopefully, "the best of the best." Even so, that's still over 20 terrific posts (including our own Bob Vineyard's submission on the perils of "going bare").

Two posts stood out: Joe Kristan, of Roth & Co, points out that not all public policy problems are necessarily tax problems. And David Maister discusses a true-life ethical dilemna, representing some major bucks and future business, and shows that "honesty (literally) pays."

The Carnival of Personal Finance is also up at Stock Market Beat . There are over 40 posts, in 9 interesting categories, with plenty of context, and a beautiful illustration.

Surfer Sam has a terrific post on Living Trusts, which are great places for life insurance plans to reside.

Insurance Dispatch...

An elite group of hospitals gets an A+ in saving lives, and empowered consumers want to know which ones. In this week's dispatch, we learn about a company that can help you find out.

Available now at Trusted.MD

Consumer Driven Health Care in action...

For the last several years, my family has been covered by a small business plan from Blue Cross of California. We’ve had one of their better PPO plans, with a $250 deductible and a $20 doctor’s office copay. Each year, as our renewal came around, the price has jumped up…most recently from a monthly rate of $1183 to $1358.

$16K per year for health insurance is simply too much. We just switched to Blue Cross’ $2400 deductible HSA plan. The premiums dropped by $785 per month…$9420 per year…for a plan with a family out-of-pocket maximum of $5500. This year I’m saving more in premiums than the worst-case annual claims. On top of that, there’s the tax savings on expenses that are run through the HSA account. Altogether it’s not a bad deal.

But, now when I go to the pharmacy, instead of paying $15 or $25 per prescription, I’m paying full freight, at least until I meet my deductible. So I decided to call around and see what a few local pharmacies would charge for a month’s supply of my latest cholesterol med, Simvastatin (the generic form of Zocor). The results were illuminating: Walgreen’s: $146 Longs: $88 Target $55 Costco: $13.56. That’s almost an 11:1 range in prices.

When I was paying a flat price per prescription, convenience was the determinant factor in filling a prescription. Walgreen’s is around the corner. Costco is 6 miles away. Sorry, Walgreen’s. From now on, I’m driving to Costco.

Cavalcade of Risk #19 is up!

SuperSaver has a sweetheart of a Valentine's Day CoR, complete with mouthwatering illustration.

Be sure to indulge yourself!

And don't forget, you can host a Cavalcade, too. Just drop us a line.

A Sweet Grand Rounds...

The Chronic Babe hosts a 'Rounds that would satsify any sweet tooth. With almost two dozen cavity-inducing entries, you'll be amazed (and impressed) with these nougats of the medblogosphere.

(I know, I may have overdone that last)

Given the theme, it seems only fitting to highlight this Diabetes Mine post, a letter to her pancreas. Well done, Amy!

Mental Health Parity

The Wall Street Journal today (13 February) reports the introduction of a Mental Health Parity bill in the Senate. This Bill would build on the Mental Health Parity Act of 1996 and require that, if mental health expenses are covered in an employer group insurance plan, they must be reimbursed the same as other health expenses in the plan i.e., cost-sharing, inpatient care, and outpatient care. Despite its name, the 1996 Act did not require full parity with other health benefits. The current Bill would produce full parity and therefore represents an expansion to mental health benefits in group insurance plans. The Bill requires States to go along, perhaps simplifying the rules for plans whose participants are located in more than one State. Employers having fewer than 50 employees would be exempt.

As reported, this Bill claims not to “mandate” inclusion of mental health in group health plans. Plans that presently do not cover mental health expenses would not be required to add such coverage, and plans now offering mental health benefits could delete them; as both of these possibilites seem far-fetched for employers having more than 50 employees, in practice this Bill is effectively a mandate.

There is a cost test – if benefit parity would require an increase in cost of more than 2% in the first year and 1% per year thereafter, the plan sponsor may “opt out” from the parity requirement although the nature of future cost tests is not mentioned.

The reporting is not clear whether the requirement applies only to insurance companies or also to the group plan sponsors such as employers, labor unions, governments, etc. Understanding this would help clarify whether the requirement falls only on insured plans or might also affect self-funded plans.

Apart from cost, I wonder about the effectiveness of outpatient behavioral care. I believe it’s still true that generally-accepted “best practices” and treatment protocols are not so well-developed and uniformly applied for behavioral health as in other branches of health care (where, BTW, substantial variation exists), which I think means there is less assurance of effective care. That is one reason why benefit plans have historically limited the coverage for such care. One thing for sure, the cost of the added coverage will be measured in tangible dollars.

The National Institute of Mental Health estimates that 25% of all Americans have at least one “diagnosable mental health disorder”. The providers represented by that organization stand to gain financially from this Bill. I believe NIMH and the behavioral health providers owe plan sponsors and the public in general, tangible and specific explanations as to how patients will benefit from the additional care, were this Bill enacted into law.